Gold Trading Close To $1700 Ahead of Mid-Term Elections
XAUUSD is trading near the $1700 level amid rising political uncertainty in the USA, which is already facing an economic crisis. From a technical point of view, the 100 EMA (daily) is close to $1716, which means that just breaking the $1700 wouldn't be enough... Instead, XAUUSD will also have to break the dynamic resistance of the 100-day EMA.
If gold manages to break the 100 EMA (daily), the next target will be the 200-day EMA. On the downside, the nearest support level for XAUUSD is the 50 EMA (daily) which is near the $1670 level.
XAUUSD (Gold) Fundamentals
If we look at the fundamental situation of XAUUSD (Gold), the mid-term elections in the USA are fast approaching. This means a lot of volatility in all asset classes, including precious metals. If the outcome of the general elections further strengthens the USD, it will not be a good sign for the Gold.
Overall, the sentiment regarding Gold is mixed, as even the US stocks are fluctuating without any clear direction. Furthermore, there are no upcoming meaningful data releases besides the US mid-elections. This means that all of the focus will be on the outcome of the elections rather than economic releases.
However, the inflation data from the USA is due to be released in a few days, which would tell us about the current economic fairs. The inflation numbers are directly tied to the interest rate policy of the USA and thus will be closely watched.
If we look at the situation of US treasury yields (10-year), it is on a retreat and was last seen at 4.161%. Furthermore, the next Fed meeting is expected to bring us a 50 bps interest rate hike. Overall, the odds for this increase in interest rate are around 52%, and around 48% odds are in favor of a 75 bps rate hike.
Historically, Gold has benefited from the weakening of fiat currencies such as USD, GBP, and EUR. So if the current political situation in the USA turns even more difficult, it could benefit Gold.